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Address by Minister President Peer Steinbrück to the annual meeting of the German Hard Coal Association on 17th November 2004

- he spoken word pertains – the “mini Coal Day” has undergone a series of changes in recent years: - as well as the conventional “in-house assessment” greater attention is now being given to the current situation in the coal industry and energy sector. – And unlike previous years, the “mini Coal Day” is now held in the public spotlight.

Minister president Peer Steinbrück

I believe the new format adopted for the "mini Coal day" is correct and an important move: grave changes in the world’s energy and raw-materials markets in 2004 have shown that it is prudent to make a public issue out of energy and coal policy whenever the opportunity presents itself. You all know better than anyone how important coal is for North Rhine-Westphalia and for the future of our energy supplies. I will not therefore be presenting an hour-long keynote speech on coal. This is more appropriate for other circles: for there are still many in the country, even some who are referred to as decision makers, who fail to grasp the important role that coal plays in our energy supplies. Some even seem not to know that without coal there can be no coke production. Moreover, there are some individuals who deliberately ignore the obvious relationships because they wish to make political capital out of the issue. I will therefore be referring repeatedly to the value chain, whose first link begins at the indigenous coal industry. Some believe in all seriousness that we can abandon coal mining any day now. Others call unrealistically for coal subsidies to be halved overnight.

As long as there is talk of this type the Minister President of the energy region of North Rhine-Westphalia will have a response to make – and this will be done unequivocally and anywhere where it is necessary and effective. This is not just for today but should also apply in 2005 and beyond.

One thing needs to be made perfectly clear from the outset: our indigenous coal will still have a fixed role to play in the future energy mix. It is the mainstay of an industrial value chain in North Rhine-Westphalia that stretches from the mining suppliers through the mining, power-generation and plant engineering industries to the reliable provision of energy and coke.

Now to look back at 2004

Since the main Coal Day that was held almost one year ago (11.11.2003) we have already taken a number of major steps towards securing this value chain. The Federal Government has agreed a number of key pillars for coal industry funding:

these include a reduction in output from 25 million tonnes in 2005 to a maximum of 16 million tonnes by 2012 and a total of € 15.87 bn in state aid to the coal industry for the period 2006 to 2012. In addition, budgetary requirements have now been guaranteed both at national level and regionally in NRW. I am proceeding on the assumption that the overall agreement will still be contractually fixed this year and that the decisions on the appropriations will be rendered during 2006-2008.

This will require some considerable effort on the part of the public authorities. Though public funds are in short supply at the present time, let me make something quite clear:

the money that we are using to support our indigenous energy sources represents a very good investment. This money reduces our reliance on global developments and is a form of insurance policy against rising prices and supply risks on the global energy markets.

For one thing coal aid helps support a viable mining industry, and for another you will all know what this means for collieries like Lohberg and Walsum. However, the figures involved also require a somewhat painful restructuring process and impose a huge burden on the mining workforce and their families – and this is something that we must take very seriously. Practical implementation of the coal funding programme means huge challenges for industry and Government alike if the jobs lost are to be replaced on a long-term basis.

As well as the financial aspects I would also like to touch briefly on two further matters:

we have taken care to ensure that the emissions trading scheme and the National Allocation Plan are organised in such a way that they are compatible with our industrial operations and contain innovation incentives for all fuel types.

But something has changed in the public perception too: the high prices being paid for oil, coke and steel, and the energy hunger being displayed in countries like China and India, have suddenly made people realise the value of indigenous energy resources. And what resources have we got here – our lignite and our coal, and our renewable energies too. When it comes to oil and gas we are exclusively reliant on imports – and incidentally for nuclear power too.

A key result that was decided over the course of the last twelve months is that we have now created the planning predictability needed for mining in North Rhine-Westphalia in the years to come.

No energy alternatives in sight

We need to keep a clear focus when engaged in the energy debate. The Federal Government’s energy policy was a topic that I put forward for discussion in my Government declaration to the Landtag on 30th June of this year. And the key message was this: coal is an integral part of the regional Government’s jointly agreed energy plan.

The energy debate illustrates that it is our political duty at all times to present the practical consequences of our policies. The political debate shows that clearly not all politicians are ready for this. And this is my reproach to the leader of the Opposition in the Landtag: we know that he is trying to cut aid to the coal industry by half by the year 2010.

Anyone who calls for such a move must know and should also declare openly what the impact of such a measure would be on our region in practical terms:

•  over the next three or four years we will be forced to lose as many as 40,000 jobs, and that would mean that adjustment assistance would only be available for a few thousand people.
• As many as 20,000 would therefore be made redundant without recourse to socially-acceptable treatment.
• Another practical outcome of such a policy would be that we would then only be capable of producing between 5 and 6 million tonnes a year.
• The public purse would not in fact be unburdened in net terms, for the amount of financial aid saved would be less than the consequential costs.

The Opposition ranks are also calling for nuclear energy to be brought back into the debate, but offer no solution to the waste disposal and safety problems entailed.

We for our part have taken up a clear position:

• North Rhine-Westphalia opted to phase out nuclear power long before the Federal Government came to the same decision. And that is how it will remain.
•  Anyone who says different is only creating new uncertainties for the energy supply sector – an industry that we are expecting to spend billions on investment and innovation.

This will do little to help us find the right set of solutions – and will in fact only bring more confusion and uncertainty. And that is the last thing that we need for our energy policy.

Long-term perspective for coal policy

We are convinced that in the decades to come coal will be one of the key energy sources, and not just in Germany but around the whole world. Current developments in the energy and raw-materials markets have confirmed our policy stance and our coal-industry decisions. This is now borne out by events in the global coking-coal and coke markets. I should recall at this point that just a few months ago coke was being traded on the spot market at the astronomically high price of as much as 500 dollars a tonne. This has now cooled down again to just below 300 dollars a tonne. Yet this is still about four times as much as buyers were paying for coke on the world market just a short while ago.

I suspect that solely due to further increases in demand from the Asiatic region the days of lower prices are well and truly over for the moment. Add to this the fact that in the oil and steam-coal markets too we have to contend with similar price developments to those in the coal and coke market. And gas prices will follow the same course. Current price developments are also re-defining the aims of supply security: previously we have taken security of supply all too often to mean that energy and raw materials are available in sufficient quantities.

Of course this still applies, but we have now learned to our cost that there is another factor of growing import. Supply security also contributes towards price stability and ensures that companies and businesses can generally work out their prices in advance. This is an important prerequisite for the maintenance of our industrial base and its value chain.

New collieries and coke works on the drawing board

Against this background we have adopted the right strategy, which is to cushion the effects of our reliance on the international energy and commodities markets as far as possible.

One thing has to be made clear in advance: the state can only help out here to a limited degree. Put more bluntly: the regional Government will not be able to offset the sale of a coking plant to China by itself placing an order for a new coke works. Certainly we are supporting and accompanying the efforts being taken by all those involved along the value chain. However it should be clear to everyone that this support cannot be a financial one.

In this context I would just like to mention two current projects that were brought into the debate by Dr Müller:

one involves the development of a new colliery to produce coking coal,

the other the expansion of coke-making capacity.

Both projects are aimed at ensuring that German supplies of coking coal and coke can again be provided to a greater extent from indigenous sources of production.

The debate is being steered in the right direction by these proposals, for the steel-processing industry is having to cope with rising costs and many small and medium-sized companies are contingent on steel price trends, which in turn depend on coke prices.

From this fact alone it can be seen that in North Rhine-Westphalia several tens of thousands of jobs depend directly on reliable energy and raw-materials costs. In view of the rising cost pressures this has effectively compelled various operators to form new alliances with common goals: RAG and WSM (Association of the Steel and Metal Processing Industry) have adopted a common position on the importance of security of supply for small and medium-sized industrial operators and for Germany’s future as a business location. This alliance typifies the networking that is taking place all along the value chain, which begins with the indigenous coal industry.

Future energy policy

Energy policy has to operate over and above the day-to-day routines of business. 

The energy policy that we have chosen focuses on our domestic strengths:

• indigenous coal
• and lignite,
• the development and introduction of renewables
• and increasingly efficient energy generation and utilisation.

These factors are now more important than ever: Germany in general and North Rhine-Westphalia in particular are modern industrial regions that are reliant on secure and uninterrupted energy supplies. We know that coal will continue to be an indispensable element in global energy supply for many years to come.

For us in Germany this means that we have to do more to export the know-how and technology we have developed for coal production and efficient coal utilisation.

Let me now take a closer look at these two export earners individually: Deutsche Bergbautechnik is a global leader in its field. This North Rhine-Westphalia based mining supplier will only be able to maintain its leading position for as long as its products can be tested and continuously refined here in the domestic mining industry. Through the “regional mining technology initiative” we provide support for the overseas activities of this group of supplier companies.

In 2003 the supplier industry exported mining equipment all over the world to the total value of over € 1 bn, with the majority of this going to the new growth market China. Much of the revenue in this area is generated by small and medium-sized firms, with 80% of them currently based in North Rhine-Westphalia – especially in the Ruhr. These few figures alone illustrate the scale of operations that we will be dealing with in the future when we talk about the “sunrise industry” that is mining. Anyone who is impatient to condemn this growth sector to the history books is quite simply being irresponsible: irresponsible to our business and industry, irresponsible to North Rhine-Westphalia as a commercial location and irresponsible to tens of thousands of workers.

NRW and power generation

North Rhine-Westphalia is also assuming growing importance as a power-station base. This can be attributed for the most part to the local mining industry. The ongoing development of power-station technology is vital if we are to safeguard and expand NRW as a power generation centre. We now have the world’s most up-to-date lignite fired power station that is capable of achieving efficiency levels of over 43%.

And we are now converting similar installations as part of the agreed power-station renewal programme. North Rhine-Westphalia has also been chosen as the site for a coal-fired reference power station.

We are on the starting blocks:

• the draft study for a reference power station with optimised plant engineering, which is to be constructed here in North Rhine-Westphalia, was completed in late 2003.
• Locally-based companies have all the skills and know-how needed to design, build and operate coal-fired installations of this kind and are world leaders in their field.

Locally-based companies have all the skills and know-how needed to design, build and operate coal-fired installations of this kind and are world leaders in their field.

• Innovations of this type provide an outstanding opportunity for the power plant industry: such a project will enable us to demonstrate that climate protection and competitiveness are not conflicting objectives. Indeed as commodities’ prices increase they are mutually dependent. And energy efficiency is the link that connects the two together.
• The construction of a 600-megawatt reference power station means orders worth a total of € 480 million and will give employment to more than 6,000 people.

Add to this the fact that high-efficiency installations of this kind featuring bullet-proof "made in NRW" technology offer every prospect of becoming huge export earners. It is now up to the power generation industry to put this jointly developed project into action. The state Government has put in place the necessary planning provisions to ensure that modern coal-fired power stations can be built at several sites around North Rhine-Westphalia. In this respect the reference power station with its 46%-plus efficiency rate is not the ultimate objective but merely the key intermediate stage for further development.

And as we work towards the still visionary – but not utopian – goal of the CO₂-free power station we are already preparing for the next stage in the process:

in the medium term new power-plant materials will be needed that can withstand even higher temperatures and pressures so that efficiency rates can be boosted to over 50%.

The EU has given the green light for the next phase of the programme: the component test facility for advanced power-station technology can now go into operation at the Gelsenkirchen-Scholven site. This plant will enable manufacturers and operators from all over Europe to work together. In association with the Federal Government we intend to continue with the development of modern power-station technologies. This will provide us with further opportunities to promote our trademark "Innovation made in NRW".

Résumé

The energy state of North Rhine-Westphalia has a coherent energy plan in place. Our overall strategy is based on five key points:

   energy policy is the core element in an economic and environmental policy whose objective is to provide a reliable supply of cost-effective, eco-friendly and environmentally-sustainable energy.

On the strength of our many years of experience in the field of energy and energy engineering we have successfully developed the most efficient of technologies for both fossil-based and renewable sources.

A balanced energy mix creates the basis for security of supply, economic development, innovation and technological progress, as well as for affordable energy.

Nuclear power is not a sustainable option.

What we are advocating is real sustainability in every area and on a global level. And that is a clear acknowledgement of our environmental commitments.

Good luck to you all!

Source: NRW Press and Information Office

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